Home Retail Group has halved the pace of sales declines at its Argos chain and bumped up cash reserves amid a takeover battle between Sainsbury’s and the South African retail group Steinhoff International.

The company boosted hopes of securing a raised bid from one of its suitors by revealing it had generated £100m more cash on its balance sheet than expected, after managing cash carefully over the peak Christmas period, cutting investment in Homebase before its sale and settling some historical tax matters, taking its net cash position to £625m.

John Walden, the chief executive, said: “An extra £100m of cash is clear value that any buyer is going to get immediately. I certainly think we’ve added more value in the last quarter.”

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Home Retail has yet to work out a formal process to handle any revised bids from its potential new owners. Walden said the company was talking to both sides and waiting to see if either would put forward a firm offer before putting any process in place.

He said Home Retail’s board would not just be considering price when assessing any rival bid: “There will be a range of things to consider. [It will include] top line value but other factors like the strategy going forward.”

He said the board would also look at the potential synergies that could be derived from a tie-up and how that might help the business in future.

Home Retail’s share price stands at 180p, 5p more than the value of Steinhoff’s putative offer, which analysts expect Sainsbury’s to at least match.

David Jeary, an analyst at Canaccord Genuity, said the £100m was “welcome news for both potential bidders”.

A trading update on Thursday showed like-for-like sales at Argos, which exclude new space, fell 1.1% in the eight weeks to 27 February, compared with a 2.2% decline in the 18 weeks to 2 January. Sales of electrical items, mainly video gaming, tablets and white goods, dropped while mobile sales were up.

Sales of non-electrical products rose, led by furniture and sports items, partially offset by a decline in jewellery.

When taking into account the “cannibalisation” impact of new space, like-for-like sales were flat. Total sales at Argos climbed by 1.9% to £515m after it opened 94 digital concessions and collection points in the past year. Argos has 845 stores.

Internet sales grew 13% and accounted for 51% of Argos sales, up from 46% a year ago. Sales made through mobile devices such as smartphones and tablets grew by 15% to make up 28% of Argos sales, up from 25%.

Walden said: “I am pleased with the continued improvement in Argos’s sales performance in the period, together with the continued progress in the Argos Transformation Plan to become a digital retail leader.”

The company introduced FastTrack in October, a same-day home delivery and store collection service. Walden said on-time delivery rates and customer satisfaction had reached “leading levels”.

The retailer expects to meet City forecasts of £93m in pretax profits for the year to 27 February.